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Suppliers continue to wait for payment

Major contractors have not responded to the government’s call to pay suppliers within 30 days, latest figures have revealed.

The research by the National Specialist Contractors Council - shared exclusively with Construction News - shows that only 2 per cent of suppliers were paid within the recommended timeframe in the second quarter of 2011, down from 7 per cent in Q1.

Worryingly for the government - which just two weeks ago renewed its call for prompt payment - more than half of that work was for public sector clients.

The NSCC State of Trade survey shows that 58 per cent of those questioned picked up public sector work in Q2. Of this number, 69 per cent said they did not get paid within 30 days.

The research shows that 79 per cent were paid in 30-60 days, and 19 per cent took longer.

In February, the government set out a “radical package of measures” to promote growth for smaller businesses.

Two weeks ago, Cabinet Office minister Francis Maude warned that the government would be keeping a close eye on how big suppliers chose to pay their subcontractors.

NSCC chief executive Suzannah Nichol said: “We are in the middle of a recession; everybody wants to hold on to their money.

“We are getting lots of complaints about tier one contractors not passing money through the supply chain, not releasing retentions and some are starting to play tricks with under valuing so they don’t have to pay out to subcontractors.

“This is because tier one contractors are feeling the squeeze now.”

She said this would only harm the quality of work and would create a more expensive problem in the long run.

“The construction strategy is clearly focused on making sure people that do the work are paid fairly and in full. That is a massive cultural shift, but people have to change the way they operate.”

She added: “If they have squeezed the very life out of suppliers by withholding cash, they will no longer have a supply chain to do the work.”

Ms Nichol said one issue was that a number of public sector contracts were signed up before the government guidance was handed down.

The NSCC report also found that 76 per cent of respondents have monies withheld in retentions, with 29 per cent of retention monies overdue.

Ms Nichol pointed out that the percentage of specialist contractors reporting more difficulty in recruiting skilled staff has more than doubled from 8 per cent to 19 per cent.

She suggested that this was an early indicator of a skills shortage that would follow the downturn.

The survey also found 53 per cent of companies expected margins to fall, a slight drop on the previous quarter’s 60 per cent.

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Exclusive: NSCC chief executive Suzannah Nichol has called on government to “take a close look” at contractors it is working with who are continuing to use retentions to the detriment of supply chains.

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